The Impact of Fee Schedules

Fee schedules play a critical role in reimbursement for every physician practice. Many physicians, however, don’t know what, exactly, a fee schedule is, and how their own is kept up-to-date.

Oftentimes, when we speak with physician practices and ask about their fee schedules, the physician acknowledges that they have a fee schedule, but that they have no idea who created it, maintains it, or even where it originated.

So, let’s start at the beginning…

A fee schedule is a complete listing of all the fees used by an insurance carrier to pay physicians and other providers of healthcare services/products. This comprehensive listing provides a maximum reimbursement that each carrier will pay to physicians for their services.

Often, many commercial/managed care carriers will base their fee schedules off of the CMS’ Physician Fee Schedule, and so CMS is frequently referenced as the leading authority for the average reimbursement for medical services. Each insurance carrier that a physician/physician group is credentialed and participating with will have their own fee schedule that is a part of their contract with physicians for reimbursement.

Fee schedules are also used internally by physician practices for both cash billing and carrier billing for services provided. These fee schedules are created and maintained by the physician and their billing staff, and are used to ensure that the physician is collecting the maximum amount of revenue allowed by the carrier for each date of service.

Why is all of this important to physicians?

Let us provide an example…

Say you see a new patient and your internal fee schedule (what you bill the insurance company) is set at $75 for a new patient office visit CPT. The insurance carrier receives and processes the claim and reimburses you the entire $75. That’s great, right? Not always.

Total reimbursement by an insurance carrier for a billed amount often signals that the billed amount may be too low, and that the provider may be losing out on the maximum allowable reimbursement for that CPT; this is an indicator that the practice needs to review their billing fee schedule and perhaps increase the charged amount on certain CPT codes.

Conversely, imagine that the same patient has returned for another visit. You’ve updated your fee schedule and are confident that you will now collect the maximum you are owed for the service. Your billed amount is now set at $150 for this service. The insurance company receives and processes this new claim; however, this time only reimburses you for $25 of the billed amount. What happened? Is your fee schedule now set too high or did the insurance company reimburse too low?

Unless you have a copy of your fee schedule with that carrier or understand what the average reimbursement for that CPT is, it will be difficult for your biller to know why the claim was reimbursed at such a low rate.

These two scenarios are good representations of what we frequently encounter when we consult with various physician practices and organizations. It is not uncommon to uncover significant lost revenue, either because the claim was billed at too low an amount, or because the biller did not have the time, information and resources (system set up) necessary to make sure each claim was being paid correctly.

It is critical that physicians and their managers recognize this crucial piece of the billing cycle, and work to make certain that it is kept up to date within their practice management system.

If you have questions or need extra help with your fee schedule and/or other areas impacting your revenue cycle, we can provide assistance.